NexPak returns to Chapter 11 bankruptcy amid plans to sell its assets

By Caroline Salls

Pittsburgh, April 14 - NexPak Corp. filed for Chapter 11 bankruptcy Friday in the U.S. Bankruptcy Court for the District of Delaware.

According to a declaration filed by president and chief restructuring officer Kevin I. Dowd, the company filed for bankruptcy after a thorough examination of its restructuring options.

In connection with this process, Dowd said NexPak has been in extensive discussions with its pre-bankruptcy secured lender group, and the parties have decided that a going-concern sale of the company's business operations will best maximize the value of its assets.

The company has requested court approval to use the cash collateral of its pre-bankruptcy secured lenders to fund its Chapter 11 case. Without the cash collateral use, NexPak said it would be forced to shut down immediately.

The cash collateral use will expire on the earliest of the effective date of a plan of reorganization, dismissal or conversion of the company's bankruptcy case, the appointment of a trustee or examiner, the date on which the court allows relief from the automatic stay on any portion of the collateral, any attempt to subordinate or avoid the priority of the debt owed to the lenders and May 29.

Debt details

NexPak has $47 million in assets and $112 million in debt, according to Dowd's declaration.

The company's largest unsecured creditors include:

• Pam Capital Funding, LP of Dallas with a $17.83 million subordinated secured debt claim;

• First Dominion 3 of New York with a $3.49 million subordinated secured debt claim;

• Highland Legacy, Ltd. of Dallas with a $2.82 million subordinated secured debt claim;

• Morgan Stanley Prime Income Trust, based in New York, with a $2.56 million subordinated secured debt claim;

• Deutsche Bank, based in New York, with a $2.41 million subordinated secured debt claim;

• First Dominion 1 of New York with a $2.32 million subordinated secured debt claim;

• Chevron Phillips Chemical Co., based in Chicago, with a $2.09 million materials supplier claim;

• Ineos Olefins & Polymers of Chicago with a $1.92 million materials supplier claim;

• First Dominion 2 of New York with a $1.55 million subordinated secured debt claim; and

• Highland Crusaders Offshore Partners of Dallas with a $1.29 million subordinated secured debt claim.

Market decline

This marks NexPak's second bankruptcy filing. The company emerged from its previous case on Dec. 31, 2004.

Dowd said in his declaration that this new filing was prompted by declines in revenues, operating margins and earnings that have plagued the entire entertainment market segment and overall economy.

In addition, Dowd said several of NexPak's unsecured creditors have either filed or threatened to file lawsuits against the company.

As a result, Dowd said the company filed bankruptcy in part to stay those lawsuits pending completion of an asset sale.

NexPak is a Duluth, Ga., media packaging company. Its Chapter 11 case number is 09-11244.

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